Davidson Introduces Federal Regulatory Oversight Act to Protect Small Business
WASHINGTON, DC - Congressman Warren Davidson today introduced the Federal Regulatory Oversight Act, H.R. 4755, legislation to protect small business owners in Ohio and across the country from the overreaching regulatory powers of the Federal Reserve. The Dodd-Frank Act made the Federal Reserve the nation's most powerful bureaucracy as the Fed regulates nearly every sector of the financial services sector and is funded through open market operations and other sources of income, outside the appropriations process. This bill would subject the Federal Reserve's regulatory activities to the Congressional appropriations process.
Stop! You're growing too fast!
Congressman Davidson spoke about his personal experience as a small business owner, manufacturer and victim of the Feds arbitrary, anti-growth overreach during a recent House Financial Services Committee meeting.
Davidson recalls personal story as a victim of the Fed's overreaching, anti-growth regulatory policies.
Rep. Davidson: ... I am particularly concerned with actions of the Fed as regulators and I’ll share a story. Prior to even thinking I would be a member of Congress, I was a business guy and I had a banker come talk to me and say “you know, you’ve been growing at 20 plus percent at these manufacturing companies and maybe you should just grow at 5 percent instead and play more golf.”
And I’m like, is that really what you want me to do? And he’s like “no, I want to loan you more money.” Well why would you say that? Well because they wanted to treat, under Basel III standards, the line of credit as if it were fully utilized when we were using only about a third.
Well, of course, that weakens the balance sheet. These kinds of things have had an incredible impact on the growth rate of our entire macro economy and you would think, is there a law that was passed? Is this part of Dodd-Frank?
No, this is simply the Fed acting as a regulator. Rulemaking, which we have oversight and review of in other regulatory agencies, the Congressional Review Act lets us rescind bad policies, but the Fed is somewhat immune to any of our suggestions, so could you address some of those concerns, sir?
"Sure, I mean these are many of the types of concerns that I have been writing about, though I didn’t ever have as good of an example as that one. That’s amazing." -Dr. Norbert J. Michel
For years, idea that Congress should just delegate to the Fed, you know, just got ahead and take care of all this stuff, and somehow that was democratic and somehow that was just and somehow that the Fed was accountable for what they’re doing is insane. They have gone much farther than they should have and that’s just my opinion. This needs to be reined in in a way that there is less discretion and that they are focused on monetary policy and that no other regulator should have as much discretion to do something like what happened to you.
The Fed should be neither regulator or monetary manipulator...
Rep. Davidson: Mr. Pollock, maybe you can come in on how the Federal Reserve blends this sense of credibility as a momentary policy, and of course we have to have an independent monetary policy, to kind of blur the lines and say but acting as a regulator here, could you comment on that?
Mr. Pollock: Thank you Congressman. In my view, the Fed should be independent neither as regulator nor as monetary manipulator or manipulator of credit allocation and asset prices. I also would go further perhaps than the proposal, as far as appropriations go, I don’t see any reason we shouldn’t appropriate all the Feds expenses, not just the non-monetary ones because every dollar, as I said in my testimony, the Fed spends is, in fact, a taxpayer dollar.
Rep. Davidson: I appreciate that and so that kind of shows that this is a more modest proposal, that there would be some support for a stronger position and that this is hopefully something that can reach some bipartisan support. I was encouraged to hear Mr. Sherman in his opening remarks talk about some concern for the lack of accountability for federal agencies to this body. My last few seconds here, I would just like to throw out there, one of the concerns highlighted by the rulemaking activity on short term credit, the other thing is in their conduct of monetary policy, the Fed has been shopping short term money for long term money and what has been the effect of that on the growth rate of our economy in your assessment?
Mr. Pollock: Congressman, if I could try on that one, the clear effect has been that de facto it has radically shortened the maturity structure of the debt of the United States and made the expenses of the debt, going forward, very vulnerable to higher short term interest rates.
Rep. Davidson: Thank you. My time has expired and I yield.